'Global Burnout Syndrome' May Hurt Recovery: WEF

GENEVA (By Jonathan Lynn) - The world is suffering from "global burnout syndrome" and is too weak to tackle the web of interrelated threats facing businesses and governments, the head of the World Economic Forum said on Wednesday.

Klaus Schwab, who chairs the WEF that organizes the annual meeting of executives and politicians at Davos, said the world had not yet fully digested the crisis that emerged from the financial crunch, and was not yet in post-crisis phase.

"We have to be careful that this crisis does not become a social crisis -- which it has in some countries," the German business studies professor told a media conference on the gathering at the Swiss resort from January 26 to January 30.

"We have in the world a situation where the political system and the institutions are just overwhelmed by the complexity which they have to face," he said.

The Davos meeting, protected by beefed-up Swiss security which includes the closing of local airspace, is the world's top networking event, allowing bankers and CEOs to rub shoulders with presidents and prime ministers, and to cut deals.

But the uneven economic recovery makes it a particularly challenging time to be meeting, with emerging economies rebounding but rich countries still struggling.

In the rich world social tension is rising as governments bring in austerity measures to pay off debt or postpone hard decisions on borrowing, while companies return to profitability and banks resume controversial bonus payments.

Global forecasting and analysis group IHS says a restructuring of eurozone sovereign debt is inevitable and while it is unlikely that fringe countries will drop out of the euro, financial markets could force the next phase of crisis management as early as this year.

"This will very likely include a debt restructuring plan, with 'haircuts' for investors and further aid for the European banks holding much of this debt," IHS Chief Economist Nariman Behravesh said in a briefing for the Davos forum.

COMBINATION OF RISK, FAILURE OF GOVERNANCE

In a report last week, the WEF identified three interrelated nexuses of risks -- economic, such as fiscal, trade and currency problems; raw materials, particularly the impact of rising energy costs and dwindling water supplies on food prices; and illegal trade, corruption and failed states.

"It's not just risks in isolation, it's the combination of risks that can be so dangerous," said WEF Chief Business Officer Robert Greenhill.

Rising economic disparity and social tension nationally and the increasing inability of the global community to tackle problems proactively exacerbates these threats.

"It's that failure of global governance... which is perhaps the greatest risk of all," Greenhill said.

Glitz and hype surround the meeting in Davos, an upmarket ski resort made famous by German novelist Thomas Mann in his novel "The Magic Mountain" written at a time when it was better known for its sanitoriums for wealthy tuberculosis sufferers.

But the organizers do not claim it can actually solve the problems it discusses -- although anti-capitalist campaigners denounce it as a plutocratic cabal plotting global domination.

"The World Economic Forum is not a decision-making body. It fosters dialogue, it fosters understanding," Schwab said.

But Greenhill said it will try to help with the complex of threats by launching a "global risk response network" bringing together company risk officers and government policy-makers.

As usual the WEF will wheel out several global leaders among its 2,500 participants. The chair of the G20, French President Nicolas Sarkozy, addresses the forum on Thursday, January 27.

Among 25 government heads expected are German Chancellor Angela Merkel and Russian President Dmitry Medvedev, who opens the forum on Wednesday, January 26. Medvedev, a keen user of the micro-blogging site Twitter, will take questions from the public via "crowdsourcing" on www.wef.ch/askdmitrimedvedev.

The cast list also features eight central bankers, including European Central Bank President Jean-Claude Trichet, who will also take part in an open session accessible to the public, and 14 labor leaders and more than 1,400 CEOs and other business chiefs -- 400 of whom will be using Twitter as "CEO reporters."

Davos's reputation in the past was made by several high-profile diplomatic meetings on the sidelines.

This year, seven key trade ministers hosted by the European Union will meet on Friday, January 28, as part of renewed efforts to conclude the nine-year-old Doha round to free up world trade -- itself one of the biggest failures of global governance.

For full coverage, blogs and TV from Davos go to www.reuters.com/davos